How to grow your digital revenue | Interview with the CDO of the Financial Times
How can companies find their North Star metric - a single metric that drives the core business and is integral to creating a digital revenue stream? We interview Tom Betts, Chief Data Officer at the Financial Times.
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Harriet Wright: This is the audio living case study, stories of digital transformation from the Financial Times and beyond. I’m Harriet Wright, Head of Client Projects at FT Strategies, the new boutique consulting firm from the Financial Times. Today’s living case study is on finding a North Star metric and my guest is Tom Betts, Chief Data Officer at the FT. Tom Betts joined the FT as a senior data analyst in 2009. Back then, the data function was a team of two and the idea of understanding readers was quite a new concept for a news organisation. Tom built the data function from the ground up, and today it numbers over fifty people, which speaks to the impact that the data has had on the growth of the FT, and the breadth of which it applies. In 2015, Tom was appointed as the FT’s first Chief Data Officer and Board Member, and it was around this time that the North Star metric was born. This concept of a North Star is a single metric that drives the core business and helps us organise all our activities. For the FT, this metric is reader engagement, and finding this was a journey of discovery. Tom, I’d love you to take me back to the start - where did this all begin?
Tom Betts: So, to take this all the way back to the start to 2009, for me what was interesting was coming into a news organisation, we had started to amass some data, but we didn’t have much. But what the FT did have was a fledgeling subscription business, and what was interesting was that we were starting to build and form direct relationships with our audience. What we learnt over the course of the next few years is that actually data can be enormously powerful and transformative for a subscriptions business, and the feedback we were getting from our customers allowed us to understand more about what they wanted and allowed us to improve our marketing effectiveness. As we invested more in those capabilities, we started to recruit more people, collected more data and built more technology. And actually, what started to happen was that although we were being very successful in deploying this stuff, we realised that actually we had almost too much information. There was too much noise and it was becoming difficult to discern the signal from that noise and see what was really important.
So we set about trying to work out what were the underlying drivers of customer acquisition - what makes somebody want to buy a subscription, what are the underlying drivers of someone being likely to renew that subscription. We looked at a whole host of factors to try and work this out, and actually it became clear that usage (whether people actually use their subscription, do they read the journalism, are they getting value for money out of it) was a key indicator of people’s likelihood to purchase. That’s all well and good to say it, but we also had to work out then, what is it that makes people want to read more journalism - how can you influence it? And we did a whole host of studies to try and understand this and really focused on this idea of habit building and habit formation which became a central hypothesis for what was driving usage in the first place. And we started then to develop this metric using techniques we developed from the retail industry, a segmentation method called RFM, which has been used for many years in marketing but never really applied to media. We took that concept and effectively created a news media version of that metric which looked at the recency with which you’re reading our journalism, the frequency with which you read and the volume of articles that you read when you come in. Putting all those things together, we were able to create this one metric that actually explained the things that mattered to us as a business. It helped us explain the relationship between the behaviour of our readers, our subscribers, and the likelihood of renewing subscriptions. And therefore it became a sort of galvanising focus and force for a subscriptions business.
Harriet Wright: And at this point, this was around 2015, did you feel like the data team doing this work was leading the way and everybody was following, or was it that you were doing these little experiments and there was work to be done to get this taken seriously within the business to be widely applied?
Tom Betts: Well, I think as you said earlier it was a journey of discovery and I don’t think the data team was alone in pursuing this path. I think people across the business from marketing to product development, finance, strategy and even the editorial teams were curious about what are the drivers of subscription, satisfaction, renewal, etc. And so they were asking these questions and what we were trying to do in the data team was trying to provide answers. And we kept on hitting these walls that there’s too much data and complexity, so how do we actually distill it into something that people can understand and that they can work with, something that’s actionable but relatively straightforward.
Harriet Wright: And this is the engagement metric which is essentially a number, and that number tells you something about the reader’s propensity to stay or leave.
Tom Betts: Yeah. So it effectively - we score each and every reader. And this score gives us an indication of their habits of consuming our journalism, but you can break it down into different components that helps you understand what sort of reader they are, how you might encourage them to read more, also frankly once you use this in your analysis it helps you understand what sort of content people are interested in reading, what attracts new audiences, what helps turn someone who’s brand new and not familiar with what we do into a loyal reader. So it gives us diagnostics that we can use to assess many things that we do as a business and gives us a common, consistent way we can measure these things so when we are, for example, discussing the success of a project in a meeting, we have a common language with which we talk to one another and we’re not looking at three different experiments that have three different measures of success and therefore aren’t really comparable.
Harriet Wright: And if you were to think about how this has been applied to within the organisation, can you tell me three different ways that teams or functions or individuals have used this metric?
Tom Betts: So…it’s interesting because RFV and this focus on engagement has become the single focus of the organisation. We’re very clear that our future lies in growing and scaling a digital subscriptions business. And so, wherever you look across the company, people are focused on driving engagement. But I think, if I were to think of some of the different ways in which we’ve been using this….the first one that springs to mind is in our subscriptions marketing. These techniques and this focus on the RFV as a segmentation for customers is something that grew out of our CRM and our email marketing capabilities. They were actually the first to adopt this approach, and we had pioneered the development of this metric with them, because the CRM team said we really need something that helps us measure the effectiveness of the marketing we’re doing and categorise people into different segments so we can tailor our message more importantly. So, that was an initial focus, and continued to be an area of significant focus over the years.
The second example that springs to mind is in our B2B business. The FT has a B2B and a B2C subscription model, and often people perceive the FT to be a consumer brand - you buy a newspaper at the news stand or you subscribe to it. But the reality is that today our B2B subscription business is the largest proportion of our subscriber base, and is still the fastest growing part of the subscription business, and that business and its pricing model is actually based entirely on the engagement of our audience. So, B2B customers do not pay for people who read the FT from their companies but who are not engaged. And therefore it’s part of the very fabric of that business. Without that metric and focus on engagement, we would not be growing the B2B business in the way that we have, and we would not be able to provide the kind of analysis and diagnostics that have really contributed to that growth.
And then finally, and perhaps most importantly, the idea of measuring and optimising engagement has united our commercial and editorial priorities in a way that we’d never really managed to synchronise before. I think one of the beautiful things about the subscription news product is that it actually unifies the priorities of the commercial and editorial teams in a way that wasn’t really possible in the past in a more advertising driven model where there was very clearly a more separation of responsibilities between the advertising department and the editorial department and it was very important to keep those two interests separate. In subscriptions that is not the case. Editorial teams want readers to read and enjoy the journalism and come back and want more, and so do the marketing and sales teams, and the rest of the business. So actually, this focus on engagement has allowed us to really unite the priorities of these different bits of the business but also it has allowed us to break down what engagement means to different teams and departments so if you are working in editorial, you understand what engagement means to you and you can see the connection from what you are doing on the ground right the way up to the broader strategy and the goals and success of the business.
Harriet Wright: And, when we talk about success, how has this impacted the organisation in commercial terms and a more broader strategic terms?
Tom Betts: Well, I think it’s interesting because so often we look at the projects we work on in isolation and try to count the pounds and pence impact of these projects, and I think the focus on engagement and creating RFV…actually if I zoom out from all the things we’ve built in data science models, and pieces of analysis, for me this is the most impactful thing we’ve done, and yet in so many ways it’s so intangible as well, and that intangible benefit in my mind is how it’s brought a real focus to a diverse set of teams who have the potential to pull in different directions, and this has really unified them and got them to pull in the same direction, and I think you can see in the numbers that we are being successful at doing that. So last year in 2019, the FT achieved a milestone of having one million paying readers, which we had set as an ambitious goal a number of years ago and we expected to get there by the end of 2020, but through this focus and in particular this focus on engagement, that is the thing that helped accelerate this goal in order to hit this stretch goal well ahead of our expectations.
Harriet Wright: Fantastic. And if you think about the future of this engagement metric, you know, this is something we’re looking at today but will this metric change or will we have a new metric - how will it evolve
Tom Betts: I don’t think the fundamental relationship between engagement and the success of the business will go away, because fundamentally I think it explains something about human behaviour which is, you don’t want to pay for something that you don’t get value from. If you have a gym membership and you don’t go, then at some point you will end up cancelling it. So really there’s no difference here. So the fundamental concept isn’t going to go away. What I think is interesting and where our focus right now is about how we can take this one step further to use and grow engagement with our audience in order that we can measure and optimise the lifetime value of our customers. You know, engagement is really a proxy for the likelihood that somebody is getting value from what we do. Therefore if we can increase engagement then the chances are that they will stay as a subscriber for longer, as well as potentially be prepared to pay a higher price for the journalism. And if we can grow one or both of those things, then we will grow the lifetime value that we have with our audiences. So our focus right now is really trying to say, you know, it’s great that we got to this goal of one million paying readers - the next chapter is how do we grow the value to that audience as well as the volume. But the value piece is absolutely critical and key, and will be to our future success.
Harriet Wright: And I’m sure within that, there will be new North Star metrics to be found.
Tom Betts: Maybe.
Harriet Wright: Thank you Tom. For more episodes of the audio living case study, or to find out more about FT Strategies, please visit www.ftstrategies.com.
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